Birmingham Commonwealth Games Bill [HL]

Lord Hunt of Kings Heath Excerpts

Wednesday 24th July 2019 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, that was a very valuable intervention by the noble Baroness. I hope that her speech and the Minister’s response will be communicated to the organising committee; clearly, if we are to make a success of these Games, we need to ensure that the sorts of risks identified by the noble Baroness for the city of Birmingham and from other Games are averted.

In supporting the noble Lord, I come back to the point that he raised about the Minister’s Amendment 4 on annual reporting. First, I welcome the amendment, which very much responds to the debate in Committee. Also, to pick up the point made by the noble Lord, Lord Moynihan, the last reporting period ends on 31 December 2022. There is a practical reason for that: I understand that the organising committee will not continue after that date. However, in relation to the legacy, as he pointed out, particularly in relation to sport, physical health and well-being, the work that has to be done will go on for a period of years after the Games. It seems sensible that—whether by invitation or the organising committee formally handing it over—the city council has a responsibility for ensuring that the legacy continues. I do not quite know how that should be done, but a statement from the Minister, today or at Third Reading, ensuring that the city council is expected to continue the work on legacy and to report on a regular basis, would be very helpful.

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Moved by

[Lord Hunt of Kings Heath]

2: Clause 1, page 1, line 11, at end insert—
“(2A) The Secretary of State must provide by regulations for local authorities—(a) to raise a hotel occupancy levy for the duration of the Birmingham Commonwealth Games in the United Kingdom; and(b) to provide financial assistance equivalent to the proceeds of the levy, after costs of administration, to the Organising Committee for the purpose of delivering the Games.(2B) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(2C) If a draft of an instrument containing regulations under this section would, apart from this subsection, be treated for the purposes of the standing orders of either House of Parliament as a hybrid instrument, it is to proceed in that House as if it were not a hybrid instrument.”

[Lord Hunt of Kings Heath]

My Lords, in moving Amendment 2, I will also speak to Amendment 7, to which I have added my name. I must apologise for not being able to be here in Committee. I am indebted to my noble friend Lord Rooker for raising a number of very important matters, to which I now wish to return.

Like every other noble Lord who has spoken, I am right behind these Games and feel that they will give huge advantage and impetus to the city of Birmingham and the West Midlands in many ways. However, a financial commitment is clearly involved. The Minister confirmed in Committee an investment of £778 million. This was to be split 75:25 between the Government and Birmingham City Council and a number of its key partners. It is clearly important that the city council pulls off agreements with key partners to defray much of the expenditure. The finances of the city council are, shall we say, fragile, and it would be disappointing if any resource had to be found from existing services to find the money that the city council needs to contribute.

That is why I have considerable interest in the idea of a hotel levy tax to help fund some aspects of the Games. I understand that Edinburgh is likely to be allowed to go ahead with such a tax, and the Core Cities Group is absolutely behind it. The noble Lord may be aware that we had a very good debate last week in Grand Committee on the report of the noble Lord, Lord Heseltine, on the role of cities in investing and allowing the economy to grow. In his report Empowering English Cities, he makes the point that the Government should allow local authorities, or “mayoral authorities”, as he describes them, to,

“raise local taxes and charges. These … include vehicle excise duty, airport passenger duty, tourist tax and local cultural admission charges. With appropriate local exclusions, it is ludicrous for British tourists to pay to visit historic collections and buildings abroad while millions of visitors to this country enjoy free access”.

I will not go into the whole of his argument. The point is that there is some support for allowing local authorities to raise local taxes in the way he describes. Hotel taxes are quite accepted in many parts of the world. As the right reverend Prelate the Bishop of Birmingham said in Committee, a £1 a night tax for a three-year period could be expected to bring in £4.5 million to £5 million a year.

In Committee, the Minister did not exactly embrace this as enthusiastically, as I would have wished, but he referred us to a report on tourism tariffs by the all-party parliamentary group, which has expressed some reservations about the likely impact of a long-term tax having a positive impact on tourism infrastructure. That report concluded:

“Further studies need to be commissioned on the economic impact and viability of a tourist tax”.


I fully accept that. We are at the beginning of exploring such a concept. The argument I put to the Minister is that we have a heaven-sent opportunity to try a pilot in Birmingham to see how it works. We hope it would raise resources towards the Games. We would see what impact it had on the hotel market and the economy of the city as a whole. I cannot see what there is to lose in allowing the city council to be a pilot in those circumstances. It does not commit the Government to the principle for all local authorities in the future, but says that they are prepared to see whether a hotel tax is feasible, does not produce negative impacts and would be of immense help to Birmingham. There are two versions, if you like, of this idea: my amendment, which is a requirement on the Secretary of State to essentially bring forward a scheme, and my noble friend’s amendment, which asks the Government to look at the feasibility and come forward with a report.

In the end, it is important for future Commonwealth Games that the financial viability of these Games works out effectively for the host city. One reason why Birmingham had to take this on at short notice was the financial difficulties in the original host city. I know that the Commonwealth Games Federation is very interested in the concept of low-cost Games; indeed, the organisation of these Games is consistent with the federation’s desire to keep costs at the lowest level possible commensurate with a quality Games. All that needs to be supported. All I ask is, to ensure that that undue burden does not fall on the city of Birmingham and local services, the council is given an opportunity, as it wants, to try out a hotel tax and make a contribution to the cost. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to express some concerns about the amendments tabled by the noble Lords, Lord Hunt of Kings Heath and Lord Griffiths of Burry Port. I am sorry that I was not able to speak at Second Reading, as I am a great supporter of Birmingham, which is a brilliant, vibrant and enterprising city, and a great supporter of the Commonwealth Games. I remember the opening ceremony of the Glasgow Games, which I was lucky enough to attend as a Business Minister, with great nostalgia. We all remember those Scottie dogs. On a more serious point, I remember the benefit the Games brought to Glasgow, and indeed to UK plc. As your Lordships can imagine, I am therefore a huge supporter of the Birmingham Commonwealth Games. We are right to take the plunge, even though we have had less time than usual to prepare, because, as the noble Lord, Lord Rooker, kindly explained in Committee, we are taking over the Games planned for Durban.

Clearly, hosting the Games is a financial challenge, but I believe the Government have gone about this in a sensible way, and that the 75:25 split between central government on the one hand and Birmingham City Council and its partners on the other is fair. The Games will be a huge boost for the local economy and the worldwide reputation of the Midlands, and of Birmingham in particular. I should mention my interest as a director of Secure Trust Bank, which is headquartered in Solihull.

However—this is my concern—I am not a supporter of a hotel occupancy levy, even on an experimental basis, at a low rate, and for a good purpose. It would be a new form of taxation, and new taxes should not be introduced or even mooted without great care and consideration of the financial and administrative costs, any perverse effects and, equally important, the way such attacks can morph into a new piggy bank for the Chancellor or set an unwelcome precedent. I say the same to those looking at the hotel tax in Edinburgh.

The hospitality and hotel sector is already challenged by the changes it will have to deal with post Brexit. Moreover, in the main, it is taxed highly compared with other countries that impose hotel occupancy levies. We have VAT at 20%, employment taxes, costly business rates—which we debate often—together with the joys of vigorous HMRC-style enforcement, which competing European hoteliers often avoid. There is also a level playing field issue: digital operators such as Airbnb take trade from hotels and ironically, they would appear to benefit relatively from the proposed hotel charge. Our hotel businesses, in Birmingham and elsewhere, are in many cases small businesses, and we should be reducing burdens on them, not increasing them.

Even bigger businesses, such as IHG, which is listed in the UK and, I understand, has 350 hotels, pose a problem. By chance, I met somebody from IHG today and asked them about the Bill. I understand that the vast majority of its hotels are franchised, often to small business people and family enterprises.

So there is a problem. My noble friend has rightly promised more information on the Games budget, which I look forward to studying. However, I ask him to live up to the principles of fiscal rectitude and resist this new tax, however well argued in the context of the Bill.

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[Lord Hunt of Kings Heath]

My Lords, I am grateful to all noble Lords who have taken part in what has proved to be a spirited debate. We have taken quite a tour around the issues. The right reverend Prelate the Bishop of Birmingham said in Committee that a £1 charge might raise £4 million to £5 million per year; I do not think that a £1 tax will impact hugely on the economics of the hotel trade in Birmingham and, indeed, the West Midlands. To take my noble friend’s example of the Crowne Plaza, every day brings a new rate according to how the market operates; hotels are quite used to flexing the prices they charge.

Regarding uncompetitiveness, I suppose that one should acknowledge the Government’s efforts on behalf of the tourist trade in allowing the pound to collapse in the wake of their disastrous policies on Brexit. There are many factors, but the point made by my noble friend Lord Griffiths is that we know there are arguments both for and against a hotel tax. I do not seek to run away from that; my idea was simply that we have a great opportunity to try this out, not so much as the thin end of the wedge but as a pilot, so that we get, for once, some evidence-based policy. It would have been a good opportunity. The finances of Birmingham City Council show clearly that it has a difficult balance to strike. It wanted to run the Games, so it has had to give guarantees around budgetary control and having enough money. But, frankly, given the state of its finances, I would be concerned if it had to take money from reserves; I am not sure whether by 2020 there will be many reserves left in the kitty. It would be wrong for money to be taken out of service provision in order to fund it.

I am grateful to the Minister for what he said about the Treasury and the Government being prepared to listen to any arguments that the city council puts. The city council is now undertaking some detailed work, and that takes us quite some steps forward.

We should end on a constructive note, whereby, as I hear it, if the city council comes up with a really good argument about this, it will be listened to sympathetically. That is probably as far as I can take this, so I beg leave to withdraw the amendment.

Amendment 2 withdrawn.